Deere spiked higher on strong quarterly numbers today, handing exponential profits to bullish option traders.
On Sept. 7, Investitute’s tracking systems detected the purchase of 4,300 December $115 calls for $5.10 to $5.65 with shares at $115.71. Volume was well above the strike’s open interest of 3,387 contracts, indicating that this was fresh buying.
Those calls traded up to $30.70 today, 6 times their original purchase price. The stock rallied 25.1 percent in the same time period, a large move but one that still pales in comparison to that of its options. Investitute co-founder Jon Najarian, who updated the winning trade on CNBC’s “Halftime Report” this afternoon, had previewed December call strategies in Deere on the network’s website last week.
Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
DE jumped 4.32 percent to $145.25 today. The agriculture equipment manufacturer topped profit and sales estimates before the market opened.